Unlocking the benefits of revolving credit facilities for property auction finance purchases: A broker’s guide

Introduction to buying a house at auction

Buying a house at auction has long appealed to investors looking for opportunities to secure properties below market value. However, auctions come with unique challenges that make access to the right finance essential. Once the hammer falls, buyers are committed to tight deadlines. Typically, a deposit must be paid immediately, and the balance is due shortly after. Without fast and flexible funding, even the most promising deal can fall through, costing clients valuable opportunities and forfeited deposits.

This is where the speed and reliability of finance can make all the difference. Many brokers are familiar with bridging loans for these scenarios, but an increasing number are looking at revolving credit facilities as a more adaptable option for clients who are buying a house at auction.

What is a revolving credit facility?

A revolving credit facility, or RCF, is a flexible type of finance that works in much the same way as an overdraft. Rather than drawing down one lump sum with fixed repayments, your clients have an agreed limit that they can draw, repay and redraw as needed.

Unlike traditional loans that require a new application every time funds are needed, an RCF stays in place for an agreed period. This means that once approved, funds are ready to be used. In the context of buying a house at auction, this is especially useful because it removes the uncertainty of waiting for fresh approvals at each purchase.

Benefits of using revolving credit facilities in auction finance

Flexibility in borrowing and repayment

One of the biggest benefits of an RCF for buying a house at auction is the flexibility it offers. As a result of using an RCF, your client will not tied to rigid drawdown schedules or fixed repayment dates for the full facility. They can use as much their agreed limit as they need at any time and repay funds as they wish.

For example, if a buyer acquires a property at auction and needs to pay a 10% deposit immediately, they can draw only that amount and leave the rest available until completion. Once they have sold or refinanced the property, they can repay the funds and have the full limit ready for the next opportunity. This rolling access to funds can give buyers a real advantage in competitive auction situations.

Quick access to funds for deposits and completion

Speed is critical when buying a house at auction. An RCF can be approved in advance, giving clients the confidence that capital is ready when needed. With funds available immediately, there is no last-minute scramble to find the deposit or worry about missing a completion deadline.

As a primary lender, we are positioned to act quickly and approve applications in principal as rapidly as possible. Furthermore, as our whole team is based under one roof, we have a short chain of command and can communicate efficiently to get deals done.

Ability to reuse the credit limit for multiple purchases

Another advantage of an RCF is that it can be used multiple times. Buyers do not need to apply for new finance every time they want to buy a house at auction. As long as they stay within their agreed limit, they can reuse the facility to fund deposits, cover refurbishments or even bridge gaps while waiting for a sale to complete.

This makes an RCF especially attractive for experienced investors and developers who buy at auction regularly. It reduces the admin burden for brokers and gives clients the freedom to act fast when the right property appears.

Potential cost savings compared to other short-term finance options

While bridging loans are a well-known solution for auction purchases, they can sometimes be unsuitable if a project overruns or takes longer to refinance. An RCF can offer potential savings by giving your clients the ability to pay interest only on what they use.

Because funds can be repaid and reused, clients do not need to pay interest on large sums they are not using. This can make an RCF a cost-effective option for clients who value both speed and flexibility.

Advising clients on suitability

Recommending the right finance product is important when understanding each client’s situation and goals. An RCF will not be right for everyone, but for the right client, it can be a game-changer when buying a house at auction.

Certainly, it is worth considering whether your client has the experience to manage a flexible facility responsibly. Some clients may benefit more from the structured approach of a bridging loan for a one-off purchase, while others will appreciate the freedom an RCF brings.

Your clients should also be aware of the commitment that comes with an RCF. While they can repay and redraw funds as they wish, they should always be prepared to manage their cash flow carefully. A good broker will help clients see both the opportunities and the responsibilities that come with this type of funding.

Practical tips for brokers

Explaining RCF features clearly

Not every client will be familiar with how a revolving credit facility works. It is important to explain that an RCF is more like an overdraft than a loan. Using clear examples can help. For instance, explain how a client could draw down for a deposit, repay it once the property is refinanced or sold, and then have the full balance ready to use again.

Clarify that interest is charged only on the amount drawn, not the full facility limit. This helps your clients see the benefit of only paying for what they use.

Working with a lender offering RCF products As a lender offering an Alternative Overdraft facility, we know how important it is to keep things straightforward. We work closely with brokers to make the process quick and smooth for your clients, from initial enquiry through to drawdown and ongoing management.

When discussing an RCF, we encourage brokers to get clients approved well in advance of an auction. This means your clients can register and bid with total confidence that their funding is in place.

Preparing clients for auction success

Preparation is key when buying a house at auction. With an RCF ready to go, your clients can make decisions quickly and avoid missing out on good deals. As a broker, you can help by ensuring all the paperwork is completed early, so there are no delays when a client wants to draw funds. Remind clients to do their due diligence on properties and auction terms, so they know exactly what they are committing to when they bid.

Having a flexible facility in place can give clients a competitive edge, allowing them to focus on the auction itself rather than worrying about how they will fund the purchase.

The Alternative Overdraft

Our flexible Alternative Overdraft facility is designed to give your clients liquidity whenever they need it. It’s an ideal drawdown option for site purchases, buying a house at auction or funding work-in-progress. Loans range from £250K to £2M, helping to put under-used assets to better use within your client’s overall funding strategy.

Available for two years, it allows multiple drawdowns on demand which can be repaid or reused as often as required. Interest is only charged on the outstanding balance and can be serviced throughout the term. This approach helps avoid costly, repetitive setup fees.

Security is usually provided by a first charge on under-utilised property assets, or a first charge over commercial or residential properties and a second charge over residential property.

How our Alternative Overdraft helped a client

A broker contacted us to help their client who was a developer needing funding to complete works on a residential development near York. These works comprised of one finished house and seven part-completed units on the same title. Challenges included a delay in building control sign-off and reliance on a Professional Consultants Certificate (PCC) instead of a new-build warranty.

We provided a flexible £1.15M Alternative Overdraft secured against the entire site. This revolving facility gave the client fast access to funds with drawdown flexibility, enabling construction to continue without delays.

We worked with the client to manage the certification issue as a post-completion condition and took a practical view on the PCC. Funding was in place within 12 working days, helping the client move forward smoothly with the planned exit through the sale of the completed units.

Conclusion

Revolving credit facilities can be a powerful addition to your toolkit when arranging finance for clients buying a house at auction. The flexibility to draw, repay and reuse funds gives your clients the confidence to act fast when opportunities arise. For brokers, offering an alternative overdraft can help build long-term relationships with clients who value speed and adaptability.

If you have clients who are active in the auction market and want to secure funding that works as flexibly as they do, our team is here to help. Get in touch to discuss auction finance revolving credit and how our alternative overdraft could support your clients’ auction purchases and help you grow your business.

Call us on 020 8349 5190, or send us an enquiry. Our experienced BDMs are ready to answer your questions and help you make the most of this flexible finance option for your clients.